Here’s something to discuss with your accountant before you settle up your taxes next go-around, especially if you own two businesses and one lost money.
The Tax Court has ruled against the IRS and said that losses from one limited liability partnership or corporation can be deducted from your salary or investment income in the other business. In other words, if you had a paving company and paid yourself $100,000 a year out of it and a separate asphalt plant business that lost $75,000 last year you can deduct that loss from your income on the other business and pay taxes on only $25,000. The IRS had previously argued that you could only deduct those losses against future profits within that business.
The IRS has not said yet if it will appeal the ruling, but the Wall Street Journal reports that tax advisers will probably be telling clients to take the deductions this year if they are applicable.
